Bust Agency Advice
So, what do contractors do about a bust agency?
We asked David Greene, who helped organise the Chamberlain Scott contractors, for a generic explanation about what IT contractors should do when their agency is going into administration. He said:-
‘If a company goes into voluntary administration, the administrators usually are sympathetic to them. The contractors who the company owe money to must form a group, and contact the administrators and attend the administrators/liquidators meeting’.
‘So, the IT contractors must reject the offer that any company with the same director(s) as the one in Administration has made to the administrator for the assets of the company and insist he gets other offers.
‘It may also be an option for IT contractors to also remove the existing administrators and get someone else in who is on their side and not on the side of the directors of the existing company’.
Bust Agency in Administration
In a further comment David Greene said:-
‘The moment the company goes into administration parties must make offers to the administrator for the debts or the business as a whole with all its debts and assets. The administrators are bound, however, by law to take the best deal for the creditors’.
What happens, though, is that administrators that the company call in sell the assets off cheaply to the existing directors. That’s without offering them elsewhere.
Unsecured Creditors of Bust Agency
An accountant, speaking generically, said:-
‘As the IT contractors will be ranked as unsecured creditors in the insolvency, they will not receive the full amount of any cash owed, if any. So, I would suggest obtaining a copy of their last set of accounts. This is to see which companies they are linked to.
‘If it is part of a group, an insolvency practitioner will look at the possibility of the other companies funding the failing company. It all depends on the structure’.
Administrators tend to be lazy and sympathetic to the bust agency – especially if it was they who called them in.
Indeed, administrators like to do just enough work to soak up most of the company’s remaining funds. They then offer creditors, like contractors, just 3p in the pound.
When Chamberlain Scott’s assets were sold to a company containing the directors of the old company, they were sold very cheaply.
Indeed, when we asked another recruitment company what they would have paid for those contract assets they said that they would have paid a lot more.
It might be an idea for contractors to alert other agencies who might make a bid for those contract assets. They could maybe take on at least some of the debts of the contractors too.
Whatever contractors do the very worst thing is for them to do nothing.
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